What do We Really Mean by Regulatory ‘Divergence’ after Brexit?

The original idea behind the Brexit Effect project was the need to make sense of changes in UK regulatory policy after the UK finally left the European Union and exited the transition period. One way of capturing this ‘effect’ is to think of change in terms of regulatory ‘alignment’ or ‘divergence’. The conventional way we approach this is to explain divergence in terms of UK policy diverging from the EU or vice versa. But I want to suggest a need to clarify our terms more precisely by introducing a distinction between ‘baseline’ and ‘relational’ divergence.

‘Active/Passive’ Divergence

That we might need to clarify what we mean by divergence has become apparent to observers of post-Brexit regulatory policy. In its recently launched UK-EU Regulatory Divergence Tracker, the UK in a Changing Europe draws a distinction between what it calls either ‘active’ or ‘passive’ divergence. The former is where UK or devolved policymaking entails changes to EU-derived law while the latter connotes changes in EU policy with which the UK does not keep pace. 

This distinction tends to conflate two things: (1) a process of policy change – and this can be by the EU or within the UK – and (2) the outcome of that change in terms of continuing alignment, or novel divergence, between the EU and the UK. In other words, it is obvious that either the EU or the UK may be the ‘active’ instigators of policy change, It is also evident that we may want to know what the outcome of this might be, not least if we are assessing ‘divergence’ for the purposes of the Level Playing Field obligations contained in the Trade and Cooperation Agreement (TCA) between the EU and the UK. But analytically there are good reasons to keep distinct when and why regulatory policy is changing, from what the outcome is in terms of policy divergences. A different distinction is needed.

Baseline and Relational Divergence

The idea of ‘active’ divergence captures something significant and that is that a useful way of thinking about divergence is to start from the position as it stood at the end of the transition period. Recall that the UK – through the European Union (Withdrawal) Act 2018 – decided to domesticate all EU law applicable to the UK (with the exception of the EU Charter of Fundamental Rights) as at the end of the transition period (31 December 2020). At that point, where EU laws existed that applied to the UK those laws would become ‘retained EU law’ as as source of UK law. At that point alignment would be secured between EU and domestic UK law. This alignment is temporary. Some changes have been made to make this law operate outside of the context of Union membership and countless statutory instruments makes consequential changes to that body of law. But the more important question – and this is what the Brexit Effect seeks to understand – is what regulatory policy changes are now being made and what explains those changes. This is what I term ‘baseline’ divergence. It takes the end of transition as its baseline and then seeks to map what, if anything, changes. As a study of UK regulatory policy it is changes within the UK that are under scrutiny.

The idea of ‘relational’ divergence then locates any given field of regulatory policy within the UK relative to how that field is regulated in a different jurisdiction. Understandably in a study of Brexit, the primary comparison is with the European Union. It is a central inquiry whether the UK’s departure from the EU means that we find different approaches being taken by the UK and the EU. Indeed, if we found that the UK continued to remain aligned with the EU that would begin to pose serious questions about how autonomous the UK really is outside of EU membership. 

But it is important to be clear that relational alignment/divergence is simply concerned with making this sort of comparison. It is not fundamentally concerned with whether it is a consequence of activity by the UK or the EU. That is a question dealt with by asking whether there is change from the baseline and whether this is a result of action by the EU, or within the UK, or both. In that sense, the relational dimension is about comparing and measuring outcomes rather than processes. As the Divergence Tracker helpfully reminds us, these differences ub outcomes may be more or less procedural or more or less substantive.

Of course, we will typically want to synthesise our findings about what is changing (and why) and with what sorts of outcomes. But analytically it is better to keep the baseline and relational aspects distinct.

Divergence within the UK

Having clarified that we can approach divergence both from the perspective of a baseline point in time and relationally between jurisdictions we can also open up the inquiry to look beyond the EU-UK dichotomy. Because some of the interesting questions of alignment/divergence are internal to the multi-jurisdictional United Kingdom. 

The Protocol on Ireland/Northern Ireland commits the UK in respect of Northern Ireland to remain aligned with a certain body of EU rules. That body of rules is not completely static but can itself change from the baseline as it stood at the end of the transition period. When, why and how that body of rules evolves is itself an important object of study. But what is, of course, of central interest is what that means in terms of alignment/divergence between EU/Northern Ireland regulatory policy and what may be going on within the rest of the United Kingdom. By being clear about the baseline and relational dimensions we can bring clarity to analysis of the reach and effects of the Protocol.

Although the Protocol is often at the heart of debates, it is readily apparent that baseline divergence can occur within the UK simply because Devolved Administrations exercise regulatory powers that fall within their legislative competences. While the European Union (Withdrawal) Act 2018 would have allowed UK ministers to ‘freeze’ devolved competences to modify retained EU law, as I have written elsewhere, the Common Frameworks programme was intended to ensure that power was never used (it has not been used and the power ceases to be exercisable at the end of January 2022). Subsequently, the United Kingdom Internal Market Act 2020 exerts a new form of legal discipline on internal regulatory divergences from the entry into force of the Act (coinciding with the end of the transition period). For lawyers, many of the interesting questions surround what kind of baseline divergences will trigger the Act and what sort of legal treatment might they expect. There are also economic questions about what the effects of policy divergence might be on the provision of goods and services, prices and consumer choice. And then there is the constitutional question about the effects of Brexit and the internal market Act on the distribution of political authority in the UK.  The point remains that it is useful to distinguish those aspects of our inquiries that are concerned with the processes of regulatory change (and what explains why it does or does not happen) with measuring and evaluating the outcomes and consequences of alignment or divergence.

The EU and the UK in the International Regulatory Landscape

One of the risks inherent in any analysis of EU-UK regulatory divergence is that we assume any outcome is simply a function of policymaking internal to either the EU or the UK. Yet, we often find good examples where the EU and the UK are themselves seeking change in international regulatory standards or are responsible for implementing changes originating in international forums. This is particularly evident in areas of banking regulation. 

Changes in regulatory policy are not then wholly endogenous to EU/UK relations but may be responses to exogenous events in the international regulatory landscape.

Taking the baseline/relational distinction seriously means we can ask some useful questions. From the perspective of the baseline, we can inquire into  when and why the EU and the UK actively make changes from the baseline position at the end of the transition period under pressure from exogenous development in international standards-setting forums. Relationally, as well as evaluating whether the EU and the UK are aligning with, or diverging from each other when responding to these external pressures, we can also make determinations about how each aligns or diverges relative to the international standards themselves.

The point may seem pedantic and overly academic. But if we are really going to make sense of the Brexit Effect on regulatory policy we need to be clearer about what we really mean by divergence.

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